Shocked workers at a Government agency on Tyneside have been told their jobs are to be transferred to Leeds and Bristol to cut costs.

Backroom financial services staff at the Prescription Pricing Authority, based at Bridge House in Pilgrim Street, Newcastle, are facing possible redundancy if they don't move.

The jobs are to be transferred to NHS Shared Business Services Ltd, a new joint venture between the Department of Health and Xansa Ltd, a private sector outsourcing company. The move is part of plans to streamline NHS financial services over the next two or three years, saving more than £220m which will be reinvested in front-line patient care.

In a letter to staff, the authority acknowledges the news will come as a shock and the management team will do everything possible to help people find new jobs.

Only a handful of staff are involved but the Government, which has pledged to move jobs to the North East, was accused today of letting down the region.

Coun Greg Stone, executive member for development and regeneration at Newcastle City Council, said: "Contrary to the Government's promise to create jobs in the North East, we are losing them. Many people in Newcastle will feel let down by this."

The PPA, which is an arm's length body of the Department of Health, employs about 50 people in its financial services department at Bridge House and it's thought around half will be affected.

Xansa is based in the UK and India but officials say there is no plan to send the jobs abroad. Instead, they will be located at NHS Shared Business offices in Bristol and Leeds.

Newcastle-based staff will be given the chance to move when the service is transferred in April 2006. The operation provides financial services to other organisations and is estimated to have saved the NHS £1m this year.

Liz Twist, head of health at the public sector union Unison, said: "Clearly, we are very concerned this new public-private partnership is going to take work away from the PPA in Newcastle. We will be having discussions with the aim of safeguarding the interests of staff."